Amazon, WikiLeaks, Lieberman: Power and Contract

Public officials interfere with private contracts too often. But most private parties have the guts to push back when deciding that freedom of contract and the law of contracts trump officious intermeddlers from the state. That friction explains stern denials by amazon.com that government pressure influenced its decision to terminate its Web-server lease agreement with the notorious WikiLeaks, publicist of precious secrets, including a cache of diplomatic cables roiling public officials in capitals across the globe.

Amazon cited a clause in its provider contract where customers represent that they own all content posted on the site. WikiLeaks obviously breached that representation, giving amazon contractual grounds to terminate. Despite amazon’s stern denials, Senator Joseph Lieberman’s government affairs committee acknowledged that its staffers hectored the company about letting WikiLeaks use its space. The corporate denials are thus dubious. But at least amazon is right to cite its contract and the clear clause in it that makes its termination valid and at least the staffers were merely requesting information, rather than the Senator applying direct pressure.

In other visible examples of political intermeddling in contractual relations, at least one side has not come out looking so good. Three examples illustrate.

1. In March 2009, Senator Charles Grassley, Republican of Iowa, and President Barak Obama pressured American International Group (AIG) to dishonor contractual commitments to pay bonuses to employees of the beleaguered insurance giant taken over by the federal government. The company told the government to go to hell, in effect, proclaiming the sanctity of contracts. Neither the government nor the company ever considered the many valid grounds AIG had to excuse its contractual obligations. The government did not know the facts and the company obfuscated and stonewalled until public interest faded.

2. In January 2009, Representatives Dennis Kucinich, Democrat of Ohio, and Ted Poe, Republican of Texas, pressured Treasury Secretary Timothy Geithner to induce termination of a co-branding and stadium naming contract between the New York Mets baseball team and Citigroup, the teetering bank rescued by massive infusion of federal bailout funds. The company likewise thumbed its nose, stressing that its deal with the Mets made eminent business and economic sense. The members of Congress acknowledged that they had never seen a copy of the contract.

3. Campaign managers for President George Bush in September 2004 fanned the flames for CBS to terminate its contract with Dan Rather, after the anchor broadcast a story critical of Bush’s service in the National Guard during the Vietnam conflict that turned out to have been based on erroneous reporting. CBS put Rather on the bench for 15 months and then fired him, paying him about $12 million pursuant to his contract but bruising the star’s ego and diminishing his stature. It did so in meticulous conformity with their contract. Rather lost a lawsuit claiming CBS was in breach. Despite compliance, the company did not look good bowing to partisan political pressure and the campaign of a sitting President looked childish in the finger-pointing.

So far, Lieberman’s staff and Amazon look all right. But, of course, the story is young. More leaks may come.

Thanks Adam. I was glib in highlighting the ownership concept in amazon’s policy. The policy is broader. It says customers: “represent and warrant that [they] own or otherwise control all of the rights to the content . . . that [they] post; that the content is accurate; that use of the content [they] supply does not violate this policy and will not cause injury to any person or entity.”

Chris Soghoian has been enumerating cases where Amazon decided differently; including the Pentagon Papers and “Demand that Amazon stop selling Clorox. Violates ToS: ‘will not cause injury to any person or entity’ Clorox claims it kills 99% of bacteria”

Adam wrote: “As I understand it, there’s no law against me having classified data in my possession, only against those who are authorized to have it giving it to those not authorized.”

Adam, I suspect there is a glitch in your terminology “those who are authorized to have it giving it…” I suspect it’s against the law to give out classified data even if you’re not authorized to have it.

On the other hand, this WikiLeaks deal has another problem–extraterritoriality. The WikiLeaks guy is not a U.S. citizen and he’s located not in the U.S. It remains to be seen what can be done to him, if anything.

This, I suspect, put Amazon.com on shaky ground. By having the information on their server(s), they were “in possession” of the data even if they could claim they didn’t “own” it. For a loose analogy, consider a pawn broker who takes in some stolen property as collateral. If he later finds out it’s stolen, then being “in possession” obligates him to report it and give it up, even though he doesn’t “own” it until the pawn ticket expires unclaimed.

They had this data within the U.S.A. and they were then disseminating it to folks not authorized to have it. So it seems to me that there’s a strong case that they were violating the Espionage Act as it’s been in force for many years, even without the attempted extension by Senator Lieberman et al. Having been in violation (perhaps unknowingly for a while) it seems the prudent thing for them to have done what they did–stop violating.

Finally, as regards the terms of Amazon’s contract, one would have to guess that irrespective of damaging the nation’s security position, dissemination of this type of classified information violates the privacy of a lot of individuals who are presumably “damaged” by the disclosures, at least insofar as it affects their future earning power in their careers. So I would guess that yes, Amazon has an airtight case that the activity of WikiLeaks crosses the threshold for contract termination.

What I know about the Pentagon Papers is that Senator Gravel entered over 4,000 pages of them into the Congressional Record, and the Supreme Court ruled that under Article 1, Section 6, the Senator could not be prosecuted for that. The Supremes also ruled that the Government could not get a prior restraining order against the Times, but the Court ruled that the Government could subsequently charge the Times (and the Washington Post) with violating the Espionage Act for publishing the documents. Nor was Ellsburg acquited of the charge of violating the Espionage Act. Rather, the charge was dismissed because of irregularities in the case presented by the Government.

Lawrence, I hope you don’t see this as hijacking your thread. To my non-attorney’s eyes, it looks like this fine point is crucial to the entire debate. The critical question is whether the violation is “transitive” (in the mathematical sense). If it is illegal for A to reveal information, then when A reveals it to B (illegally), does the obligation of secrecy flow to B along with the information?